Major currencies steady ahead of crucial week of announcements
04/Aug/2015 • Currency Updates•
The UK currency traded mostly within a narrow band against both the Euro and the Dollar yesterday as traders await a very busy week in the UK economy. Sterling ended 0.3% lower versus the Dollar and unchanged against the single currency.
Manufacturing growth edged up slighting in July, exceeding the majority of forecasts, according to the latest data from Markit. The flash PMI increased from its two year low, of 51.4 recorded in June, to 51.9. However, while encouraging, the pace of new orders slowed to its lowest in ten months, to an index of 52.2. The UK economy continues to remain reliant on consumer spending, with manufacturing still struggling from the effect of a strong Pound in trade weighted terms, causing a slight drag on overall economic growth.
Elsewhere, the latest Ernst & Young Item Club report suggested that bank lending to businesses is set to rise in 2015 for the first time in seven years. Mortgage lending is now expected to climb an average of 3.8% a year until 2019.
Attention among traders in the UK now turns to what many economists are dubbing “Super Thursday”, with the Bank of England set to release its quarterly inflation report, interest rate decision, and monetary policy minutes. In the meantime, today we’ll have the latest house price data from Halifax and Nationwide, and construction growth for June.
A slight upward revision in Eurozone manufacturing growth was not enough to prevent the Euro depreciating against the US Dollar by 0.3% yesterday.
Greece was back in the headlines again. After a five week close, the main Athens stock index opened for the first time, falling over 20% just minutes after opening for trade. Despite recovering as the day progressed, the nation’s top four lenders were all down 30% for the day; the maximum amount allowed. The crisis in Greece appears to have had limited effect on the Euro-area’s manufacturing output though, which performed slightly better than initially thought in July. The latest flash PMI from Markit was revised upwards by 0.2 to 52.4. However, frailties clearly remain. Germany and France both recorded two month low manufacturing growth, while the same measure in Italy currently stands at a four year trough.
The Euro will be less in focus this week, with key announcements in the UK, US, and Japan likely to overshadow goings on in Europe. Today’s producer price index the only data point in an otherwise quiet day.
The Greenback was mostly steady against its major peers, with traders awaiting Friday’s labour report. The US Dollar index rose by 0.2% during the London trading session.
A big week for economic indicator data in the US kicked off yesterday with the release of manufacturing growth. The pace of growth in the manufacturing sector disappointed expectations, slowing in July. According to the Institute of Supply Management, the reading dipped from 53.5 to 52.7 after the prices paid index, a measure of expectations for future production and new orders, tanked to its lowest reading in three months of 44.0.
Spending in the construction industry also disappointed, barely rising in June. The measure increased by 0.1%, its smallest rise since January, primarily due to a sharp decline in spending on private non-residential construction projects, which dipped by the most in two-and-a-half years. Meanwhile, consumer spending rose by the smallest amount in four months of 0.2% in June, after shoppers cut back on purchases of cars and other big ticket items, while personal income growth remained constant at 0.4% month-on-month
Focus in the US will of course be on Friday’s crucial payroll report. Before that, factory orders and the latest economic optimism index this afternoon could cause moderate US Dollar volatility.
Rest of the world
Oil prices fell to a multi-month low, dragging down the Russian Ruble, which hit a five month low against the US Dollar. The Polish Zloty and Czech Koruna were given a boost following impressive PMI figures, while the Canadian Dollar continued to weaken, hitting a fresh decade low versus the Greenback.